go through Katherine K. Chen
Bangko Sentral Ng Pilipinas (BSP) data shows that the non-performing loan (NPL) ratio in the Philippines fell to a three-month low in June, even as banks continue to expand their loan portfolio.
BSP data shows that the total NPL ratio of banks has dropped to 3.34% from 3.38% in May, compared with 3.51% a year ago.
This is the lowest NPL ratio in three months or 3.3% since March.
Loans are not paid within at least 90 days of maturity, once unpaid is considered unperformance. These are considered risky assets because borrowers are unlikely to pay.
In June, the number of non-performing loans rose 0.5% to 5.39 billion PES 5.27 billion from PES 527.45 billion in May. Sour loans also jumped 5.5% from 502.42 billion Philippine pesos.
As of June, the total loan portfolio of the banking system was 15.88 trillion to 15.88 trillion, up 1.69% from p15.62 trillion a year ago and 10.9% from P14.32 trillion a year ago.
Oikonomia Advisory and Research, Inc. Reinielle Matt M. Erece, an economist, said the impact of lowering policy rates began to spill over interest rates on bank loans.
“We’ve seen lower interest rates, which may make it easier for borrowers to repay their obligations,” he said.
Since its slow cycle began last August, central banks have so far reduced borrowing costs by 125 basis points (BP). In June, the Monetary Commission cut 25 basis points, raising the benchmark rate to 5.25%.
“A slight relief in the NPL ratio may reflect stable borrowing repayment power, supported by low inflation, stable employment and still resilient domestic demand,” said John Paolo R. Rivera, a senior researcher at the Philippine Development Institute, in a Viber message.
Mr Rivera also attributed the softening ratio of universal and commercial banks’ stricter lending policies.
“But one of the bigger reasons for easing easing is that loan volumes increased significantly in the month, while loan volumes increased by about 12% year-on-year,” Eris said. “This led to a significant increase in non-performing loans to denominators, and the ratio of non-performing loans to overall loans fell.”
Meanwhile, the past loan-bearing growth of 1.75% from Phillips 6.59 billion in May, to Phillips 670.5 billion. In the year, it rose 9.17% from P614.17 billion USD.
Loans accounted for 4.22% of the system’s total loan portfolio as of June, unchanged from the end of May, but lower than 4.29% a year ago.
On the other hand, restructuring loans fell from Phillips 31.39 billion to 31.203 crore in May, but rose 6.27% from Phillips 263.62 billion in June 2024.
From 2.01% last month and 2.05% a year ago, the total loan portfolio of the industry is 1.96% less.
Banks’ loan losses rose to 1.42% in June from Phillipino Peso 498.3 billion in May to 50.91 billion to 50.91 billion, compared with 47.946 billion a year ago.
The loan loss reserve ratio in June remained unchanged from 3.19% in May, but was lower than 3.35% in the same month in 2024.
Meanwhile, lenders’ NPL coverage estimates the allowance for potential losses due to non-performing loans, from 94.57% of loans in May account for 95.4%. In the year, it fell from 95.43%.
“Cutting policy interest rates later this month can reduce borrowing costs, encourage loan growth and help more borrowers pay off their debts,” Rivera said.
BSP Governor Eli M. Remolona, Jr. It said that at the next meeting of the Monetary Commission on August 28, it is “very likely” to lower the tax rate.
“But faster credit expansion also means banks will need to carefully manage credit risks to prevent rebounds in the NPL,” Rivera said.
On the other hand, Mr Erece said Banks’s non-performing loan ratio is likely to continue to shrink in the coming months.
“In addition to the expected impact of the tax cuts, we may also expect the borrowing to increase by spending at the end of the year,” he said.
